A Guide to Paying Off a Car Early

car purchase contract with signatures


Is it good to pay off a car loan early? Our finance center has helped numerous Denver drivers determine the right time to pay off their loan. Let’s take a look at the pros and cons of paying off a car loan early, as well as how to pay off a car loan early the right way.

Is Paying Off a Car Loan Early Right for You?

Maybe your financial circumstances have improved and you’re thinking about paying down your debts. Is it good to pay off a car loan early? It can be. Paying off a car loan early might be right for you if:

  • You would like to free up money for other expenses.
  • Making larger monthly car payments won’t affect your emergency funds and other finances.
  • You would like to lower your monthly expenses to plan for a larger financial goal, such as entering retirement or growing your family.
  • You need to improve your debt-to-income ratio.

Paying Off a Car Loan Early May Not Be Right for You

Paying off a car loan early may not be ideal for every Aurora driver. For instance, is it good to pay off a car loan early if you need to build a credit history? Paying off a car loan early may not be a good idea if:

  • You can’t afford to make extra or higher car payments.
  • You have a low interest rate and the money you’d use to pay off your loan early could be better used to create a retirement fund or for a future financial goal.
  • You need to build your credit history.
  • Your loan agreement includes a large prepayment penalty.

How to Pay Off a Car Loan Early the Right Way

So, after careful consideration, you’ve decided that paying off a car loan early is right for you. Here’s how to pay off a car loan early the right way:

  • Make one extra payment per year.
  • Make Bi-Weekly, instead of monthly payments – results in one extra payment a year.
  • Round up your monthly payment to the nearest $50.
  • Do not skip a payment.
  • Refinance your car loan if you can get a better rate. With a lower rate you can afford to make higher or extra payments.

Talk to the Finance Department at Fisher Acura

Our friendly finance managers do what they can to make auto financing easy. You can even calculate your payment online. We’re just down the road from Broomfield. So, drop by or contact us today!

 

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